In light of the Gupta Group cancelling its Vaughan Metropolitan Centre high-rise project three weeks after applying to build another one nearby, at least one industry insider doesn’t believe the company is being forthright when it says it failed to secure financing.
“I don’t think Gupta is any different than anybody else,” the insider, who requested anonymity, said of the company’s Founder and Chairman Steve Gupta. “When a purchaser buys a piece of real estate, they assume the risk. Maybe it goes down in value or maybe it won’t be built because the contract is open-ended and the builder can delay it for years. But, fundamentally, when a builder sells something they assume some risk. If the cost of lumber or drywall goes up and they can’t build the thing for three or four or five years, in the spirit of free trade they have to honour their commitment like the purchaser has to. The buyers and builders have a responsibility to each other.”
The development, Icona Condos, is the latest in a string of cancelled projects that have left buyers feeling cheated because of market prices have escalated in the time between when their agreements were signed and reneged. The insider wonders whether or not the Gupta Group cancelled the project so that it could come back to market with higher price points.
“If the builder manipulates the system and almost sabotages financing for the purpose of gaining more than they would have gained by honouring their original commitment, I think it’s awful, unfair, wrong, and that builders taking advantage of a situation for their own gain without taking into account the commitments that they accepted from the buyers.
“Did those projects get cancelled because they legitimately could not finish them, or did those projects get cancelled because they could better themselves by cancelling the deals and moving forward at a different time and at a different price? To the extent that they took advantage of something because they were only going to make $1 million instead of $10m, is wrong.”
While stopping short of conjecturing that the Gupta Group definitively pulled the plug on the project because it could make more money by returning to market on its planned project at Yonge St. and Steeles Ave., the anonymous source says the optics do not look good.
The Gupta Group was also behind King Blue, a condo project in downtown Toronto on the corner of King and Peter Sts. that it sold to the Greenland Group, which is financed by the Chinese government.
With more and more cancelled developments, Plaza Corp.’s Senior Vice President Scott McLellan says that consumer confidence is taking a hit.
“It is going to put a real lack of confidence into the new housing industry in terms of purchasers,” he said. “They are going to be somewhat reluctant to put down a deposit and wonder if that deposit is just going to sit there for three years and then having their money given back to them. That’s a little unsettling I for the marketplace and there’s a lack of confidence when things like this happen.”